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Repealing Individual Mandate Would Hurt, Not Help, Low- and Moderate-Income People

Some Republican senators claim that repealing the Affordable Care Act (ACA) mandate that people have health insurance or pay a penalty — as Senate Finance Committee Chairman Orrin Hatch’s revised tax bill would do — would help low- and moderate-income people, but that claim defies common sense. In fact, repealing the mandate, which the Hatch bill proposes to help pay for permanent corporate tax rate cuts, would cause 13 million mostly low- and middle-income people to become uninsured and raise premiums for millions of others. The claim also contradicts the official Joint Committee on Taxation (JCT) estimates, which show lower-income households losing from the revised tax bill, even though these estimates account for only some of the harmful impacts of repealing the mandate.

The Republican claims ignore the increases in the number of uninsured that repealing the mandate would cause.

  • Repeal would save $318 billion over ten years by increasing the number of uninsured Americans by 13 million by 2027, the Congressional Budget Office (CBO) estimates. These savings come because millions of low- and middle-income people would become uninsured, losing financial protection and access to care. For example, the federal government would spend less on premium tax credits that help people afford ACA marketplace coverage (because fewer people would sign up for it), less on Medicaid (because fewer people would enroll), and less on the tax exclusion for employer-sponsored coverage (because fewer employees would take up such coverage from their employers).

  • The millions of low- and moderate-income people losing health insurance would be harmed. Republicans’ argument that these coverage losses aren’t harmful because they are “voluntary” is deeply mistaken. Regardless of why they lose coverage, those who would become uninsured would suffer harm. People without health insurance lack access to preventive care, are less likely to receive needed care, and have worse health outcomes. They also face huge financial risks, including the possibility of medical bankruptcy if they become seriously ill and need treatment.

    What’s more, many of the coverage losses that result from repealing the mandate would occur because the mandate serves an important outreach function: it leads uninsured people who don’t realize that they’re eligible for marketplace subsidies or Medicaid to explore their options and enroll. Coverage losses that come because people never learn about programs or financial assistance for which they’re eligible aren’t “voluntary” in any meaningful sense.

  • Overall, low- and moderate-income people would lose much more than they’d gain from repeal. CBO estimates that repealing the mandate would reduce penalty payments from people (at all income levels) who failed to enroll in coverage by $6 billion in 2027. But it would reduce marketplace subsidies and Medicaid spending by $57 billion, or almost ten times as much. Claims that repeal would help low- and moderate-income people focus on the $6 billion while ignoring the $57 billion.

Consistent with that, JCT estimates show that households with incomes under $30,000 would lose, on average, from the revised Republican tax bill once the effects of repealing the mandate are fully felt in 2021. That’s the case even though the JCT tables account for repeal’s impact on premium tax credits but not on Medicaid, cost-sharing assistance, or premiums (see below).

The Republican claims also ignore the millions of mostly middle-income Americans who would face higher premiums or other cost increases as a result of repealing the mandate.

  • Without the mandate, fewer healthy people would sign up for coverage, causing individual market premiums to rise by about 10 percent to cover the costs of a less healthy insurance pool, according to CBO. That amounts to a premium increase of hundreds of dollars per year for millions of mostly middle-income consumers — and over $1,000 per year for many older people. As Senator Susan Collins has rightly noted, these premium increases are just like tax increases for the people affected — and would likely wipe out (or more than wipe out) any benefits from the Senate bill for many middle-income people.

  • Uncompensated care would increase, raising costs for taxpayers and for people with health insurance, including those with employer coverage. Many of those who would become uninsured due to repeal would ultimately get seriously ill or injured and seek care, but would be unable to pay for it. Other participants in the health system would (involuntarily) pay for their care. That increase in uncompensated care costs could force some providers to close their doors or cut spending in ways that undermine quality of care. Providers might also raise prices, shifting costs to people with private coverage. Or, states or the federal government might have to step in to cover some of these uncompensated care costs, shifting costs to taxpayers.

In addition, the 2015 data that some Republican senators cite on penalty payments by low- and moderate-income consumers may already be out of date. In the early years after the mandate and the ACA’s coverage expansions took effect in 2014, many low- and moderate-income people were unaware of both the financial assistance and the individual mandate exemptions they qualified for. That situation has likely improved, although the Administration’s cuts to marketplace outreach have slowed progress.

  • Most low- and moderate-income uninsured Americans can get coverage for less than the cost of the penalty, thanks to financial assistance. Among uninsured people subject to the penalty whose incomes are below 400 percent of the poverty level (about $100,000 for a family of four), about 70 percent can get coverage for the same or lower cost than what they’d pay in penalties for 2018, the Kaiser Family Foundation estimates. That share is likely even higher for people with lower incomes.
  • Many low-income uninsured people — including those who are uninsured because their state hasn’t expanded Medicaid as it can under the ACA — are eligible for exemptions. At least 2.5 million uninsured adults, including 1.2 million workers, are ineligible for Medicaid because their state hasn’t adopted the expansion. While people in the “coverage gap” — those with incomes below 100 percent of the poverty line who aren’t eligible for either Medicaid or premium tax credits — are exempt from the mandate, many low-income people didn’t know about this option and assumed they owed penalties in 2014 and 2015. The IRS made an effort to contact some people who incorrectly calculated a penalty, but it has limited tools to correct excessive or unnecessary penalty payments.

Director of Health Insurance and Marketplace Policy